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Help a man out, if you will.
I'm currently dealing with an agreement whereby interest on a principal sum is to be charged at 2.5% per month, compounded.
To me, that means that in the first month, one calculates 2.5% of the principal sum; in the second month, one adds that 2.5% from the first month to the principal sum and then calculates 2.5% of the resulting amount; and so forth ad infinitum.
However, I've been struggling to come up with an excel formula to do it for me which I freely admit is down to my own ineptitude.
All the online formulas/calculators require an annual interest rate, with interest to be compounded monthly based on that rate. I've come up with something like 34% p/a - does that sound right?
I could do it manually but there are several years' worth of payments to calculate across a number of different principal sums, so automation would be preferred...
The formula you want is:
Amount outstanding = Principal x (1.025 ^ the number of months)
where ^ = 'to the power of'
**edit - assumes the money is not being paid back at all in that time period
Long column, fill down. each cell = 102.5% of the one above it?
There may be a better way, I'm pretty sure there's a formula.
as I suspected 🙂
do it their way, especially now I've read the last bit of your post properly!
http://www.stoozing.com/calculator/apr-rate-converter.php
goes in both directions. Your 34ish% is about right.
Perfect, thank you all.